Summarize this content to 2000 words in 6 paragraphs in Arabic Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Nvidia has gained $350bn in market value in wildly volatile trading since it reported first-quarter earnings just over a week ago, driven in part by a feedback loop of trading in the chipmaker\u2019s huge\u00a0options market.\u00a0The company was valued at $2.69tn by Friday\u2019s close, more than JPMorgan, Berkshire Hathaway and Meta combined, despite a pullback at the end of the week. It has added roughly $350bn since May 23, when it announced surging revenue growth over the first three months of the year.\u00a0At the peak earlier in the week its value had risen by nearly half a trillion dollars, growing by a sum close to the market capitalisation of Tesla in just a few days.Although many investors have been drawn to Nvidia by its bumper earnings, analysts say the past week\u2019s rally bears the hallmarks of a so-called \u201cgamma squeeze\u201d. In such a market phenomenon, bulk buying of call options \u2014 derivatives that give traders the right to buy at a preset price and which can pay off it a stock rises \u2014 forces brokers on the other side of the trade to buy shares in the underlying stock to protect themselves.As Nvidia\u2019s share price climbed this week, bullish traders purchased more and more call options, forcing brokers to purchase further Nvidia shares. This\u00a0pushes the company\u2019s share price higher, boosting demand for calls, all of which drives a self-fuelling cycle of further dealer hedging.\u00a0\u201cNvidia has become a one-way wrecking machine,\u201d said Charlie McElligott,\u00a0an equity derivatives strategist at Nomura. Dealers who sold call options are having \u201cto go out and buy Nvidia to stay hedged into the rally\u201d.Shares closed down 0.8 per cent on Friday, but the chipmaker has nevertheless dramatically closed the gap with Apple and Microsoft, for a long time the two largest companies on US markets.Gamma squeezes \u201cneed a trigger\u201d, said Steve Sosnick, chief strategist at Interactive Brokers. \u201cAn earnings beat, raised guidance and a stock split\u2009.\u2009.\u2009. are all potential triggers,\u201d he added, referring to a 10-for-1 stock split that Nvidia announced along\u00a0with its earnings.Such squeezes are not uncommon. The meme-stock rally of early 2021 that centred on video game retailer GameStop was another example of traders buying short-dated, out-of-the-money call options that forced brokers to snap up the company\u2019s shares, driving a huge, if shortlived, rally.\u00a0Unlike GameStop, Nvidia boasts profit margins above 50 per cent and has lately come to embody investors\u2019 hopes about the potentially transformative effect on the global economy of generative artificial intelligence, a technology that runs on the company\u2019s chips. Even investors who think Nvidia\u2019s rally may have gone too far have found the stock hard to ignore. \u201cIf you were designing a perfect momentum stock, Nvidia would be it,\u201d said Aswath Damodaran, a New York University professor and expert on equity valuation, referring to companies that are borne upwards by their own past performance. Excitement around generative AI and the Nvidia chips that underpin it has intensified to such a degree that \u201cwhen Microsoft announces a huge capex [capital expenditure] spend [with] Nvidia the recipient of that capex spend, both stocks rally endlessly on the same news,\u201d said Ritholtz Wealth Management chief executive\u00a0Josh Brown in a note to clients this week.\u00a0\u201cIt\u2019s a carousel that feeds on its own momentum and everyone\u2019s having the time of their life. Until one of that carousel\u2019s ponies stumbles. Or some CFO somewhere looks at the spending, compares it to the actual return on investment, and decides to slow things up,\u201d Brown added.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"
Summarize this content to 2000 words in 6 paragraphs in Arabic Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Nvidia has gained $350bn in market value in wildly volatile trading since it reported first-quarter earnings just over a week ago, driven in part by a<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[63],"tags":[],"class_list":{"0":"post-98428","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-tech"},"_links":{"self":[{"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/posts\/98428","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/comments?post=98428"}],"version-history":[{"count":0,"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/posts\/98428\/revisions"}],"wp:attachment":[{"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/media?parent=98428"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/categories?post=98428"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/tags?post=98428"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}